Keep following the Yellow Brick Road
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Friday morning (@ $1935), I wrote that I expected gold to "fill the space between the yellow lines." I also noted I wanted to see a weekly close over $1930 to drive up the probability of the move playing out; I am sorry I cannot provide intraday updates to regular readers, but once gold crossed $1950 and was supported, there no later than 11 am EST - post COMEX open and London PM fix (hardened PM traders will understand this), it was clear that the probability was overwhelming the move had begun.
The chart below shows the price finding resistance overnight after a tag of $2010. Currently, the price is supported at the $1985 level, which I believe will serve as support until the upcoming FED meeting. In my opinion, a solid breakout (complete with follow-through) over all-time highs could lead gold to put on gains that few would expect.
For stackers: I noted that premiums on physical bullion products were at their lowest in over two years on several occasions over the last few weeks; I expect that situation may rapidly change now.
More on adaptability using Bitcoin as an example: I noted last week that a short trade down to the 19k level was present, citing resistance at the 50-Month MA. The trade immediately played out for about $2500 to the downside. However, bulls stepped in huge at $19500 to drive the price back above that 50-MA and produced a breakout above what I see as an inverse head and shoulder bottoming pattern.
The daily chart below depicts the Inverse head and shoulder with neckline and reversal off 50-day MA, candle stick confirmation, and momentum reversing quickly from oversold Stochastic RSI. Traders must adapt when the signs manifest.
Here is another look at the monthly BTC logarithmic chart I presented last week. It has changed, as reversals usually go – the chart went from bearish to very bullish for BTC on a longer term again. Although breakouts from patterns are usually back-tested, FOMO in BTC is extreme and there's a chance there will be no looking back from here, especially if the orange line is crossed with conviction.
Given economic developments – I think a rate hike this week would be an uncommon display of intestinal fortitude from a FED chairman. In my opinion, any hike would be immediately tempered with very, very soft forward guidance. Perhaps in lieu of a hike, Powell will attempt (with futility, in my opinion) to continue to talk hawkish. Regardless, with central banks worldwide coordinating to open USD swap lines over the weekend – the FED may be tightening with one hand to loosen with another.
Thanks and good luck!